Stagnant German Economy Forecast to Grow Just One Percent in 2026

2026-02-17 economy

Berlin, Tuesday, 17 February 2026.
Despite a marginal forecast upgrade, the DIHK warns Germany is treading water, revealing that private investment remains alarming at 11% below pre-pandemic levels.

A Stagnant Recovery: The Numbers Behind the Forecast

As of today, Tuesday, 17 February 2026, the economic outlook for Germany remains muted. The German Chamber of Industry and Commerce (DIHK) has adjusted its growth forecast for the year to 1.0%, a slight upward revision from its previous prediction of 0.7% [1]. While this adjustment might appear positive on the surface—representing a forecast increase of 42.857 percent—the sentiment among business leaders suggests the economy is merely “treading water,” a state of stagnation that has persisted since 2019 [1]. Helena Melnikov, the managing director of the DIHK, characterized the situation starkly, noting that the economy is moving with the “handbrake on” and is failing to climb out of its current valley [1].

Structural Barriers: Costs, Policy, and Geopolitics

The reluctance to invest is driven by a convergence of structural risks identified by German enterprises. In the DIHK survey, 59% of companies cited weak domestic demand and rising labor costs as their primary concerns [1]. Furthermore, 58% of firms pointed to uncertainty regarding economic policies as a major risk factor, while 48% highlighted high energy and raw material prices [1]. These domestic hurdles are compounded by external geopolitical uncertainties, including anxieties surrounding US tariff policies, which continue to weigh on the export-heavy German industrial base [2][3].

The Demographic Drag on Productivity

Beyond the immediate fiscal cycle, Germany faces a severe demographic challenge that threatens long-term productivity. The labor market presents a paradoxical scenario: while there are 1.7 million skilled positions currently vacant, approximately 640,000 experienced workers remain unemployed [7]. This inefficiency is exacerbated by what experts describe as age discrimination, where companies hesitate to hire older professionals despite a looming shortage. By 2030, the German economy is expected to face a shortage of three million workers, a gap that will widen as the baby boomer generation retires [7].

Regional Disparities and the Path Forward

The macroeconomic malaise is felt acutely at the regional level. In Saxony, for instance, surveys from early February 2026 indicate that the economy remains in a “weak mode,” with local housing cooperatives reporting a challenging business year due to rising construction and financing costs [5]. While there are minor operational improvements, such as a decrease in grid interventions by Mitnetz Strom in 2025 due to renewable energy integration, the broader sentiment is one of dissatisfaction with the lack of a cohesive government vision for infrastructure stimulus [5].

Sources

Recession Germany